Container cargo imports surged during the final weeks of 2016, as retailers reported strong holiday spending and stocked up on inventory heading into the new year.
The upswing in volume was a welcome trend for the ocean container shipping industry, where overcapacity and weak demand drove rates to historic lows last year, leading to consolidation among the largest carriers and the bankruptcy of Korean shipping line Hanjin Shipping Co.
Recent data from U.S. ports indicates retailers, manufacturers and other shippers are starting to fill some of that excess capacity. According to research firm Panjiva, which tracks trade data, U.S.-bound seaborne shipments increased 8.9% in December over the same month a year earlier.
The ports of Los Angeles and Long Beach, which make up the nation’s largest seaport gateway, imported 665,816 loaded containers in December, measured in 20-foot equivalent units, an increase of 7.8% over the same month in 2015. Exports were up 11.8% over the same period, to 287,834 TEUs last month.
The year-end increase in import volume came as a surprise to many in the retail industry. The National Retail Federation, a trade group, hasn’t released its estimate for December imports, but raised its forecast to a 7% gain at major U.S. ports, from 3.2% in an earlier report. November imports rose 11.2%, beating the NRF’s prediction for a 3.6% year-over-year gain.
Retailers stepped up imports amid growing expectations for strong sales in 2017, an optimistic view that was bolstered by strong holiday sales, with last-minute online purchases pushing sales growth during the final weeks of the year. Consumer confidence levels for December reached their highest levels since August 2001, according to the Conference Board, a research firm, as wages rose and unemployment dropped.
The uptick in volume in December may also have to do with the timing of the 2017 Lunar New Year—a major holiday in China during which the nation’s manufacturing facilities shut down for as long as three weeks. Trade with the U.S. tends to surge in the weeks leading up to the holiday, which falls relatively early in 2017.
With ocean freight rates rising steadily since hitting their lowest levels in March of last year, the import surge could spell the beginning of a rebound for the struggling container shipping industry. Several of the industry’s biggest players have announced plans to merge or form alliances, and three major groupings are expected to be fully operational as of April of this year. Industry executives and analysts expect freight rates to rise as the industry consolidates.
Shippers may be stocking up on inventory now in case rates rise this spring, said Jock O’Connell, a trade economist.
The year-end surge led to record-setting annual volumes—including loaded and empty containers—at several major ports, including Los Angeles, Oakland and the port authorities of Virginia and South Carolina. Annual volume was down 5.8% year over year at the Port of Long Beach, where Hanjin had been a major stakeholder of the port’s largest terminal facility.
Together, the ports of Los Angeles and Long Beach handled 11.3 million loaded TEUs for the full year 2016, a rise of 3.4% from 2015. Total loaded container volume for 2016 rose 4% at the South Carolina ports and 7% at the Port of Oakland.
Source: Wsj.com
